Business is no longer perceived as a reserve for those born with a silver spoon in their mouth. Many people are finding a niche in doing business with the help of savings or loans. However, in as much as many people are jumping onto this bandwagon to supplement their income, the number of businesses closing shop in Kigali, with many of them failing to make it even to their first anniversary, is shocking.
In his view, Robinson Mugisha, an economist and policy analyst, the failure for many people to keep their businesses to their feet is largely attributed to taxation and their failure to keep up with competition due to entrepreneurial illiteracy.
A report commissioned, a few months ago, by the Private Sector Federation (PSF) cited high taxes, particularly stemming from multiple taxation, as the major constraints to doing business in Rwanda.
Karen Umwali began her clothing business a few years ago. She attests that high rent and tax charges in Kigali, coupled with competition has been a huge challenge in the growth pace of her business.
Mugisha believes that so many constraints for a successful business are centered on taxation. One of them is the incompliance with tax regulations, which as a result, sees many small businesses players paying hefty fines that that could have otherwise been used to keep it running.
The other issues include uniform tax where all business are required to pay 10 per cent of VAT as well as multiple taxes.
“Some micro SMEs cannot afford this VAT and with Rwanda Revenue Authority delaying to refund this money to the business operators, it slows down their businesses. Business people are also required to pay a levy on multiple taxes like sanitation, security and parking. They may seem small but they accumulate and become costly, which impacts their competitive edge with the region,” he says.
The other factor to business closure, he adds, is the different skills that businesspeople come with, which affects many sector players.
“Business people cannot have the same business skills or level of exposure. We have so many foreigners who are very aggressive with a wide range of exposure and this affects innovators,” he says.
What to know
While one does not necessarily have to enroll for business studies to pull off a successful to business, experts on small businesses suggest that managing growth can either make or break a business.
David Muhinda has been doing business in Rwanda for decades now. He says that as the country’s economy is on the rise, so is the competition. This, for him, calls for business owners to be more innovative and work hard to stay afloat.
“Owning a business means sacrificing much of your time, especially when your business is just starting. You need to take care of multiple things, like managing customers, completing invoices, and doing a market survey. If you think just opening shop automatically leads to success, you are bound to fail,” he says.
He also adds that focusing on one’s objectives and patience will contribute to their business success.
“I’ve seen so many people apply for an agricultural loan but then are using it for a totally different kind of business. Also you have to be patient. Just because one’s business is doing so well will not automatically make yours profitable. As long as you have a business plan and you are focused on your goals, it will eventually pay off,” he says.
For Umwali, the primary goal for any business is to be profitable. This means using all possible means to ensure that the business earns more and continues to grow.
First, any business owner should consider whether they truly have a passion for what they are investing in. After you are sure that it is your passion you are following, identify your customers’ needs, calculate your business risks and have proper financial books, she says.
For Mugisha, one of the most important rules to a successful business is educating yourself about the tax laws in business to avoid penalties that can completely kill the business.
“A market survey that can provide adequate information is also vital to avoid losses and equipping yourself with skills to produce quality products and services, such as packaging or even advertising for your products can give one competitive edge,” he adds.
Claudine Mwangacucu, a make-up artist, gives a number of tips to a successful business and advises that for one to start a business, you have to be aware that your clients are like fuel. Without that fuel your business won’t go anywhere.
“When you start business you have to do your research very well and know who you are targeting. You also have to be creative and have a difference. You should be honest with your clients for them to be able to trust you and deliver what you said you will do. Also, go out of your way to please your clients and never underestimate what one client can do. They can either help bloom your business or kill it so don’t take clients for granted.
“You also have to be good at what you do, aim at giving the best service, as a matter of fact, give excellent service. If you fall short, apologize to your clients and let them see that you are sincerely sorry. You could send a token to show them that they are important to you. People like feeling important. Also, don’t judge a client because the one that looks poor might be a billionaire, and the one that looks like a billionaire might not have much. Treat them equally,” she says.
How to get up in tough times
Entrepreneurs are expected to shoot up each time but if that doesn’t happen, it is a sign that they are heading towards tough times.
In that case, Mugisha suggests building their human capacity to bring out their innovativeness. This, he says, can be done by exposing themselves to the business world and borrowing ideas from successful businessmen even abroad.
“It doesn’t have to be copy and paste but borrowing some ideas to apply to your business can keep you on the market trend. While travelling is recommended for businesspeople, to open them up to new ideas, not everybody can afford that, so being alert on the current market trends can help you come up with innovative ideas,” he says.
Like the quote “Alone we can do so little, together we can do so much,” Mugisha adds that businesspeople should not be afraid to enhance collective investment by pulling funds together to give them a competitive edge.
Source#Rwandan Business Times, By Sharon Katengwa